A federal judge halted Staples Inc.’s proposed acquisition of Office Depot Inc., effectively ending a bid to unite the two biggest U.S. office suppliers into what the government argued would be an unchallenged giant.
U.S. District Judge Emmet Sullivan in Washington blocked the $6.3 billion deal Tuesday, a victory for the Federal Trade Commission, which argued that the combined national supplier of pens and printer paper would harm buyers.
The FTC met its “burden of showing that there is a reasonable probability that the proposed merger will substantially impair competition in the sale and distribution of consumable office supplies to large business-to-business customers,” Sullivan wrote in a three-page order issued late Tuesday.
Staples fell 10 percent in after-hours trading before being halted, while Office Depot plunged 26 percent.
Sullivan’s ruling — an injunction putting the deal on ice while the FTC challenges the tie-up in its administrative court — almost certainly kills the planned merger. The companies have said they would walk away from the deal rather than continuing to fight the case.
The decision marks the second time the FTC has blocked a combination between the two companies. In 1997, the commission successfully sued to halt their proposed merger, saying the tie-up would have hurt competition.
The ruling is a win for antitrust officials who are grappling with a record wave of mergers that are combining some of the biggest companies across industries. Earlier this month, Attorney General Loretta Lynch warned about the risks to consumers from consolidation and vowed that the Justice Department, which shares antitrust jurisdiction with the FTC, would oppose problematic deals.
The FTC sued Staples and Office Depot late last year, contending a single national office-supply seller with no obvious rival would undermine the ability of large corporate clients to bargain for better prices by playing the two firms off one another in negotiations.
Defense lawyers argued that the companies needed to combine to contend with looming competition from Amazon.com Inc.